A taxing effort

New mining levy embraced by state, local officials

December 23, 2012

MARQUETTE - State lawmakers reacted favorably to the signing Thursday of a package of bills that will govern taxing of non-ferrous mining operations in Michigan.

"It was a good work product. This is a good example of the legislative process working well. I thought we put forward a good, thoughtful proposal but it became better because we got good, instructive feedback from all levels of government," Republican Gov. Rick Snyder said. "We had a broad array of different people bring forward ideas. This is when things work right, when people come together and say, 'Let's talk about this,' changing this and changing that, finding areas for compromise. I thought this was actually a good work product."

State Rep. Matt Huuki, R-Atlantic Mine, introduced the severance tax bills after working on the idea for more than a year. Huuki said he was pleased with the bills' signing.

Article Photos

Flanked by state officials, State Sen. Tom Casperson, R-Escanaba, and Gov. Rick Snyder hold up a copy of House Bill 6008, which is the new severance tax on mining that was signed into law by Snyder Thursday morning in Lansing. At the far right is Humboldt Township Supervisor Joe Derocha. (Tom Casperson photo)

HUUKI

"This is phenomenal news for the people of the Upper Peninsula, who need more good-paying jobs that the mining industry can offer," Huuki said. "The new tax reforms will lower start-up costs to encourage companies to locate here while protecting existing mining jobs."

The legislation places a 2.75 percent severance tax on gross mineral value on specified non-ferrous metallic minerals, such as the copper and nickel to be mined at the Rio Tinto Eagle Mine in Michigamme Township. The tax replaces the property tax, corporate income tax, sales tax and use tax that mining companies currently pay.

Sixty-five percent of the revenue from the severance tax - which will be collected locally - will be retained by counties, townships, school districts and the school aid fund. The remaining 35 percent will go into a rural development fund to support long-term regional economic opportunities.

The legislation also provides for a base tax to provide revenue to local taxing authorities that is guaranteed for five years. The Legislature will have final approval of projects recommended for funding by the rural development fund advisory panel.

Snyder said the severance tax will encourage more mining.

"It will provide more stability and fairer outcomes for local communities and for the state of Michigan in the sense of how the tax works. The old system was a dumb system, to be blunt. If you look at it in the context of the property tax, there's an ore body that nobody really knows what it's worth, how much it is ... people would be paying taxes before anything happened," Snyder said. "It's not a bright system. What this basically did is what most of the world already figured out, was to say, 'Well, why don't we solve that problem as the ore comes out. We know what it's worth, now let's apply the tax rate.'"

Huuki agreed, thanking Snyder for "seeing the tremendous merits of the legislation."

"These are commonsense measures that benefit everyone. Instead of charging taxes on the potential for future mining, it's smarter and more fair to levy severance taxes on minerals as they are removed from the earth," Huuki said.

State Sen. Tom Casperson, R-Escanaba, and Humboldt Township Supervisor Joe Derocha attended the bill signing ceremony. At one point, before the base tax was developed, Derocha was one of the strongest critics of the legislation. He spoke in favor of the bills Thursday.

"Sen. Casperson saved the day with his extraordinary efforts in helping draft and pass legislation that was fair to the area and the U.P.," Derocha said. "This landmark legislation reflects sound tax policy that is fair and not only helps move the U.P. forward, but also helps local units of government and those we serve meet the many demands that are placed on them."

Casperson also praised the merits of the bills.

"This is transformative legislation that will have far-reaching implications as it is simple, fair and transparent and, as such, is sure to attract mining companies to explore and invest in the Upper Peninsula, creating good-paying jobs and inspiring economic development in the region," Casperson said.